BUCHAREST (Romania), December 9 (SeeNews) – Romanian consumer electronics and IT products retailer Flamingo International said on Wednesday it commenced insolvency proceedings as negotiations over additional debt write-off with ING Bank, one of its main creditors, failed.
Since the beginning of the year Flamingo International has been restructuring its operations by cutting costs to half of last year's level and paying off part of its debts to creditors, but “despite our great efforts, negotiations with ING failed as the bank refused to further write off debt and launched enforcement procedure at some of our outlets,” the retailer said in a statement.
Last month Flamingo signed a principle agreement with the Romanian branch of ING Bank for the restructuring of its outstanding loans worth 17.5 million euro ($25.8 million).
“At the moment Flamingo is operationally restructured, with an optimized costs structure, but it lacks the cash necessary to overcome the 50% fall of the market. By starting insolvency proceedings we are trying […] to bring back the company where it needs to be,” the company’s director general Stefan Treiber said in the statement.
In a separate statement ING Bank said Flamingo’s management has presented it with several business plans but none has resulted into improvement of the company’s operations and it kept failing to respect its obligations under the loan agreement.
The reorganization procedure is designed to protect the company from creditors, but on the other hand it impacts the operating activity, Raiffeisen Capital & Investment (RCI) said in a note to investors.
“The opening of the reorganization procedure will probably discourage the investors from subscribing [for Flamingo’s convertible bonds], which will put the company under additional burden. We view the news as negative,” RCI added.
In late November Flamingo International said it would launch a 29 million lei ($10.1 million/6.9 million euro) convertible bonds issue to sustain its operations.
The public offer for shareholders with preemptive rights opened on December 3 and will last until January 2. For other interested investors the offer will be valid from January 5 to January 11, 2010.
Flamingo’s shares were suspended from trading on the Bucharest Stock Exchange at 1401 GMT on Wednesday. They last traded down 14.9% at 0.0217 lei at 1359 GMT.
(1 euro = 4.2268 Romanain lei)